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Oxfam Briefing Paper

101
EMBARGOED UNTIL 22:00 HRS GMT 20 MARCH 2007

Signing Away
The Future
How trade and
investment agreements
between rich and poor
countries undermine
development
The quiet advance of trade and investment agreements between
rich and poor countries threatens to deny developing countries
a favourable foothold in the global economy. Driven by the USA
and the European Union, these agreements impose far-reaching
rules that place severe restrictions on the very policies
developing countries need in order to fight poverty.
Summary
The quiet advance of trade and investment agreements between rich and
poor countries threatens to deny developing countries a favourable foothold
in the global economy.
Powerful countries, led by the USA and the European Union (EU), are
pursuing regional and bilateral free trade agreements with unprecedented
vigour. This is happening without the fanfare of global summitry and
international press coverage. Around 25 developing countries have now
signed free trade agreements with developed countries, and more than 100
are engaged in negotiations. An average of two bilateral investment treaties
are signed every week. Virtually no country, however poor, has been left out.
Rich countries are using these bilateral and regional free trade agreements
(FTAs) and investment treaties to win concessions that they are unable to
obtain at the World Trade Organization (WTO), where developing countries
can band together and hold out for more favourable rules. The USA has
called its approach competitive liberalisation, and the EU declared its
intention to use bilateral deals as stepping stones to future multilateral
agreements.
The EU argues that this new generation of bilateral and regional agreements
is vital in order for developing countries in Africa, the Caribbean and the
Pacific to maintain their access to European markets in a form that is
compatible with WTO rules. It has also repeatedly told poor countries that it
has no commercial offensive interests in the negotiations and that there will
be long periods for implementation. Yet its far-reaching proposals and
aggressive approach appear to contradict these statements.
The inexorable advance of such trade and investment agreements,
negotiated largely behind closed doors, threatens to undermine the promise
of trade and globalisation as forces to reduce poverty. In an increasingly
globalised world, these agreements seek to benefit rich-country exporters
and firms at the expense of poor farmers and workers, with grave
implications for the environment and development.
The worst of the agreements strip developing countries of the capacity to
effectively govern their economies and to protect their poorest people. Going
beyond the provisions negotiated at a multilateral level, they impose far-
reaching, hard-to-reverse rules that systematically dismantle national
policies designed to promote development.
The USA and EU are pushing through rules on intellectual property that
reduce poor peoples access to life-saving medicines, increase the prices of
seeds and other farming inputs beyond the reach of small farmers, and
make it harder for developing-country firms to access new technology. The
proposed trade deal between the USA and Colombia, for example, would
increase medicine costs by $919m by the year 2020, enough to provide
health care for 5.2 million people under the public-health system. Under the
USDominican RepublicCentral America Free Trade Agreement (DR-
CAFTA ) the prices of agrochemicals are expected to rise several-fold.

Signing Away The Future, Oxfam Briefing Paper, March 2007 2


The rules on liberalisation of services in FTAs threaten to drive local firms
out of business, reduce competition, and extend the monopoly power of
large companies. When Mexico liberalised financial services in 1993 in
preparation for the North American Free Trade Agreement (NAFTA), for
example, foreign ownership of the banking system increased to 85 per cent
in seven years, but lending to Mexican businesses dropped from 10 per cent
of gross domestic product (GDP) to 0.3 per cent, depriving poor people
living in rural areas of vital sources of credit.
These new rules also pose a potential threat to poor peoples access to
essential services. In some US FTAs, developing countries are committing
themselves to let foreign investors into public utilities if the sector is opened
up to domestic private companies. A leaked version of the EUs draft
negotiating mandates for FTAs with ASEAN, India, Central America, the
Andean countries, and South Korea show that the EU is seeking similar
provisions for water and other utilities.
New investment rules in many agreements prevent developing-country
governments from requiring foreign companies to transfer technology, train
local workers, or source inputs locally. Under such conditions, foreign
investment fails to build national linkages, create decent employment, or
increase wages, and instead exacerbates inequality.
The investment chapters of FTAs and bilateral investment agreements make
governments vulnerable to being sued by foreign investors if a new
regulation is perceived as damaging the investors profits, even when such
reforms are in the public interest. Current claims against Argentina for
emergency measures adopted during the financial crisis in 2001/2002 are
estimated at $18bn.
Free trade agreements can impose radical tariff liberalisation, threatening
the livelihoods of small farmers and preventing governments from using tariff
policy to promote manufacturing. For example, through its Economic
Partnership Agreements (EPAs), Europe proposes to oblige the poorest
countries in the world to reduce a very large part of their tariffs to zero. At the
same time FTAs do not address the adverse impacts of rich-country
subsidies on poor countries through dumping, or the plethora of non-tariff
barriers that continue to impede access to rich-country markets.
The overall effect of these changes in the rules is to progressively
undermine economic governance, transferring power from governments to
largely unaccountable multinational firms, robbing developing countries of
the tools they need to develop their economies and gain a favourable
foothold in global markets.
Although developing-country governments have proved themselves
increasingly assertive at the WTO and in some regional and bilateral
agreements, the balance of power in current negotiations remains tipped
heavily in favour of rich countries and large, politically influential
corporations. Furthermore, within developing countries, small businesses,
trade unions, non-government organisations, womens groups, and
indigenous peoples have very few mechanisms for participation, and their
rights and needs are largely ignored.

3 Signing Away The Future, Oxfam Briefing Paper, March 2007


Trade and investment are essential for development, and the imbalances
that characterise and distort global trade and investment rules must be
addressed as a matter of urgency. But unequal and exploitative free trade
agreements and bilateral investment treaties, which prohibit the very policies
developing countries need in order to fight poverty, is no way to put trade
and investment at the service of development, or to build a safer, fairer
world.
In order to turn the tide and put trade and investment at the service of
development, Oxfam believes that trade rules, whether multilateral, regional,
or bilateral, should:

Recognise the special and differential treatment that developing


countries require in order to move up the development ladder.

Enable developing countries to adopt flexible intellectual-property


legislation to ensure the primacy of public health and agricultural
livelihoods and protect traditional knowledge and biodiversity.

Exclude essential public services such as education, health, water and


sanitation from liberalisation commitments.

Recognise the right of governments to regulate the entry of foreign


investors to promote development and the creation of decent
employment, and include commitments to enforce core labour standards
for all workers.

Ensure mechanisms for extensive participation of all stakeholders in the


negotiating process, with full disclosure of information to the public,
including the findings of independent impact assessments.

Signing Away The Future, Oxfam Briefing Paper, March 2007 4


1 Free trade agreements and bilateral
investment treaties: everybodys
business

The focus on bilateralismdamages the rights particularly of the


poor and the weak because in a bilateral negotiation the objectivity of
a global system goes out the window and you have in effect a
bullying opportunity often for the major trading powers.
Peter Sutherland, former WTO Director General and Non-Executive
Chairman, BP & Goldman Sachs1

Free trade agreements are not right for developing countries


it is not a negotiation, it is rather an imposition.
Joseph Stiglitz, Co-Recipient, 2001 Nobel Prize in Economics2

Powerful countries, led by the USA and European Union (EU), are
pursuing regional and bilateral free trade agreements with
developing countries with unprecedented vigour.3 They use these
agreements to win concessions they are unable to obtain at the World
Trade Organization (WTO), where developing countries can band
together and hold out for more favourable rules. And they use the
agreements to undermine the negotiating positions of developing
countries in the WTO.
During 2006, more than 100 developing countries were engaged in
over 67 bilateral or regional trade negotiations, and signed over 60
bilateral investment treaties. More than 250 regional and bilateral
trade agreements now govern more than 30 per cent of world trade,
whilst an average of two bilateral investment treaties have been
agreed every week over the last ten years.4
The rules negotiated in these agreements reflect the bargaining power
between the parties. Agreements between developed and developing
countries are invariably imbalanced. As this paper demonstrates, the
new rules that are being pursued through bilateral and regional trade
agreements by rich countries are inimical to development. They
require enormous irreversible concessions from developing countries,
and almost nothing from rich countries, save maintaining current
market access. They demand much faster liberalisation and stricter
intellectual-property rules than the WTO, and strip developing
countries of the policy space they need to effectively govern their
economies. They present a serious and wide-ranging threat to

5 Signing Away The Future, Oxfam Briefing Paper, March 2007


developing countries abilities to protect their poorest people and lift
them out of poverty.

NorthSouth agreements: a new route to


enforce economic domination
Historically, industrialised countries have pursued bilateral trade and
investment agreements largely for political reasons, but as the global
economy changes there is a growing impetus for new agreements on
economic grounds.
In the last two decades, production systems have globalised and now
span many countries goods are no longer created in one country
and then traded with another. On average, the worlds largest
companies have affiliates in 40 different countries, and an estimated
10 per cent of world gross domestic product (GDP) is now produced
within the global production systems of individual transnational
corporations.5 The balance of power in the global economy is also
shifting. At current growth rates, by 2050, the economies of China,
India, Brazil, Russia, Indonesia, Mexico, and Turkey combined will be
larger than that of todays G7.6
In this new economy, ownership and control over the vast global
production chains and access to the worlds fastest growing markets
determines who is rich and who is poor. The USA, EU, and Japan are
using trade and investment agreements to extend the influence of
their leading companies, and reduce the ability of developing
countries to gain a beneficial foothold in the global economy.

A stepping stone to changing global rules


The USA and the EU have made it clear that they are pursuing
bilateral and regional trade deals with a view to eventually changing
international rules in their favour.
Right after the failed WTO Ministerial in Cancun in 2003, Robert
Zoellick, the US Trade Representative, announced that the USA
would push ahead with free trade and investment agreements with
can-do countries: By pursuing multiple free trade initiatives, the US
is creating a competition for liberalisation that provides leverage for
openness in all negotiations, establishes models of success that can be
used on many fronts, and develops a fresh political dynamic that
puts free trade on the offensive.7
In October 2006, Peter Mandelson, the EU Trade Commissioner,
made a similar pronouncement: Europes bilateral agreements will of
course be driven by competitiveness considerations that reflect our

Signing Away The Future, Oxfam Briefing Paper, March 2007 6


trade priorities [] they will be [] stepping stones to future
multilateral agreements [ and] road-test liberalisation that can
ultimately be extended to the global system.8
The one exception is the Economic Partnership Agreements the EU is
negotiating with 75 African, Pacific, and Caribbean (ACP) countries
and South Africa. Peter Mandelson proclaims these are the European
Commissions most basic expression of the desire to put trade and
development together [] These agreements will help build regional
markets, build up productive capacity and diversify ACP
economies.9 The EU has repeatedly told the ACP countries that it has
no commercial offensive interests in the negotiations and that there
will be long periods for implementation. Yet its far-reaching
proposals and aggressive approach appear to contradict these
statements.

Undermining the multilateral trading system


FTAs pose a deep threat to multilateralism and the core values of the
WTO. They directly contradict the Most Favoured Nation (MFN)
principle, the cornerstone of the multilateral trading system. They
create a maze of overlapping arrangements, leading to substantial
trade diversion as countries discriminate against efficient, low-cost
suppliers outside of the trade agreement in favour of less efficient
suppliers from within the trading bloc. Costs of trade further increase
as each agreement has its own rules of origin, tariff schedules, and
periods of implementation.
Developing countries often negotiate FTAs in the hope of increasing
their market access into developed countries or under the threat of
preference withdrawal, which looms large for many. Central
American and Andean countries depend on the US market for at least
50 per cent and 42 per cent of their exports respectively, while the
countries negotiating Economic Partnership Agreements (EPAs)
depend on Europe for more than 40 per cent of their exports.10
However, the more FTAs are signed by the USA and the EU,
especially with more competitive developing countries, the less
valuable this preference will be and the higher the costs compared
with negotiating in a multilateral forum. The World Bank concludes
all developing countries would collectively lose if they were all to
sign preferential agreements with Canada, the EU, Japan, and the
United States.11
FTA negotiations weaken the resolve of governments to get a
multilateral deal. They provide a convenient illusion that a countrys
trade agenda is moving forward in spite of the paralysis of WTO
negotiations, allowing trade ministers to boast about concrete

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achievements and postpone difficult decisions and trade-offs that
would be necessary to broker a multilateral deal. New FTAs further
complicate the problem of preference erosion, which has already
become an intractable problem at the multilateral level, as countries
have a vested interest in defending preferential margins against MFN
liberalisation.
FTAs divide developing countries, undermining their collective
bargaining power, as individual countries or groups of countries
which have already significantly opened their markets to developed
countries are likely to take different positions from those which still
have high tariffs, as demonstrated in the splits among developing
countries in NAMA negotiations.
At a more practical level, the capacity of developing countries and
developed countries to negotiate a WTO agreement is seriously
weakened by the plethora of parallel FTA negotiations. Despite all
efforts at training negotiators in developing countries, there are just
not enough capable people for most of them to concentrate
adequately on more then one serious trade negotiation at a time. In
recent years we fear that it is the WTO that has lost out in terms of
negotiating focus. 12

Time to turn the tide


Around 25 developing countries have now signed free trade
agreements with developed countries, and more than one hundred
are engaged in negotiations.13
Despite increasing pressures to sign, some developing countries are
refusing to succumb. The insistence of the MERCOSUR block of
countries in South America on real concessions from the USA
brought negotiations on a Free Trade Area of the Americas to a
standstill. South Africa and Thailand have walked away from
negotiating free trade agreements with the USA, disputing the
proposed rules on public health and investment regulation
respectively.
Even in Economic Partnership Agreement negotiations, where power
imbalances are immense, the Pacific negotiators have warned the EU
that negotiations are in danger of being placed in jeopardy unless
they are convinced that on balance, an EPA would deliver significant
benefits to them and enable achievement of the economic and trade
cooperation objectives.14
Now is the time to turn the tide. Developing countries stood up
against unfair rules at the WTO. They now need to stand in solidarity

Signing Away The Future, Oxfam Briefing Paper, March 2007 8


as developed countries relentlessly try to break down their resolve
through bilateral and regional trade negotiations.

Table 1: Developing countries involved in bilateral and regional trade


negotiations with the USA, EU, Japan, Australia, Canada, and New
Zealand

Signed Under Negotiation


USA NAFTA (Mexico, Panama, Malaysia, South Korea, Thailand
Canada)
DR-CAFTA
(Dominican Republic,
Costa Rica, El
Salvador, Guatemala,
Honduras, Nicaragua)
Jordan, Singapore,
Chile, Morocco,
Bahrain, Oman, Peru,
Colombia
EU Mexico, Chile, South ECOWAS (Benin, Burkina Faso, Cape Verde,
Africa, Tunisia, Cte d'Ivoire, The Gambia, Ghana, Guinea,
Morocco, Egypt, Guinea-Bissau, Liberia, Mali, Mauritania,
Turkey, Lebanon Niger, Nigeria, Sierra Leone, Senegal, Togo)
SADC (Angola, Botswana, Lesotho,
Mozambique, Namibia, Swaziland, Tanzania)
CARIFORUM (Antigua and Barbuda,
Bahamas, Barbados, Belize, Dominica,
Dominican Republic, Grenada, Guyana, Haiti,
Jamaica, St. Kitts & Nevis, St. Lucia, St.
Vincent & the Grenadines, Suriname, Trinidad
& Tobago)
CEMAC (Cameroon, Central African
Republic, Chad, Democratic Republic of
Congo, Congo, Equatorial Guinea, Gabon,
So Tom & Prncipe)
Pacific (Cook Islands, Fed. States of
Micronesia, Fiji, Kiribati, Rep. of the Marshall
Islands, Nauru, Niue, Palau, Papua New
Guinea, Samoa, Solomon Islands, Tonga,
Tuvalu, Vanuatu)
Central America (Guatemala, El Salvador,
Honduras, Nicaragua, Costa Rica, Panama)
MERCOSUR (Argentina, Brazil, Paraguay,
Uruguay)
Andean Countries (Venezuela, Bolivia,
Colombia, Ecuador, Peru)
Algeria, Cyprus, Israel, Jordan, Malta, Syria,
Tunisia, Palestine

9 Signing Away The Future, Oxfam Briefing Paper, March 2007


ASEAN (Brunei, Cambodia, Indonesia, Laos,
Malaysia, Philippines, Singapore, Thailand,
Vietnam)
Gulf Cooperation Council (Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia and the United
Arab Emirates)
Japan Singapore, Mexico, ASEAN (Brunei, Cambodia, Indonesia, Laos,
Malaysia, Thailand, Malaysia, Myanmar, Philippines,
Philippines Singapore, Thailand, Vietnam)
Gulf Cooperation Council (Bahrain, Kuwait,
Oman, Qatar, Saudi Arabia and the United
Arab Emirates)
Brunei, Chile, India, Indonesia, Thailand,
Vietnam
Australia ASEANNew Zealand (Brunei, Cambodia,
Indonesia, Laos, Malaysia, Myanmar,
Philippines, Singapore, Thailand, Vietnam,
New Zealand)
China, Malaysia
Exploring FTAs with Chile, Mexico, South
Korea and Gulf Cooperation Council (Bahrain,
Kuwait, Oman, Qatar, Saudi Arabia and the
United Arab Emirates)
Canada Chile, Costa Rica, Andean Community (Bolivia, Colombia,
Mexico Ecuador, Peru and Venezuela)

CARICOM (Antigua and Barbuda,


Bahamas, Barbados, Belize, Dominica,
Grenada, Guyana, Haiti, Jamaica,
Montserrat, St. Kitts & Nevis, St. Lucia, St.
Vincent and the Grenadines, Suriname,
Trinidad & Tobago)

Central America (Guatemala, El Salvador,


Honduras and Nicaragua)

Dominican Republic, Korea Singapore


New Singapore, Thailand, ASEAN (Brunei, Cambodia, Indonesia, Laos,
Zealand Trans-Pacific (ratified Malaysia, Myanmar, Philippines,
by New Zealand, Singapore, Thailand, Vietnam)
Brunei, and Singapore,
but not yet Chile) China, Malaysia

Signing Away The Future, Oxfam Briefing Paper, March 2007 10


2 Intellectual property: placing
knowledge out of reach
Intellectual-property rules, when used effectively, can encourage
innovation, development of new technologies, and economic growth.
However, if they are too strict, they can limit developing countries
access to technological know-how and affordable medicines, while
failing to protect traditional knowledge. The balance between
rewarding innovators and promoting public access is being skewed
by unfair trade rules in FTAs.
Advanced industrialised countries are using FTAs to push for stricter
intellectual-property rules to maintain their growth and
competitiveness and support the expansion of their companies.
Developing countries fought hard at the WTO to preserve specific
flexibilities to set intellectual-property rules appropriate to their
developmental needs, but now even these are being undermined.
The USA is the most aggressive proponent of stricter intellectual-
property rules, requiring developing countries to sign agreements
that go far beyond the WTO Trade Related Intellectual Property
Rights Agreement (TRIPS). The EU is following closely on its heels,
including intellectual-property chapters in the negotiations of EPAs
with 75 African, Caribbean, and Pacific (ACP) countries and South
Africa, and elsewhere pushing plant-patent protection and strong
copyright rules that undermine development.

Reducing access to medicines


The cost of medicines represents the greatest share of health-care
expenditures for people in developing countries, and most of these
countries provide little health insurance or public-sector coverage for
medicines. The main proven mechanism to reduce the price of
medicines is through competition with generic drugs.
However, every FTA currently signed or under negotiation by the
USA imposes intellectual-property rules that delay the introduction
of generic medicines. These rules include protection for clinical trial
data that grants exclusive use to the patent holder, preventing
registration of generics during the patent term, and extending patent
monopolies.
The public-health consequences are staggering. In Colombia an FTA
with the USA could reduce access to medicines by 40 per cent, equal
to the cost of health care for 5.2 million people under the public-

11 Signing Away The Future, Oxfam Briefing Paper, March 2007


health system. The USPeru FTA is expected to leave 700,000 to
900,000 Peruvians without access to medicines unless public health-
care spending and individual incomes increase, while the USThai
agreement would restrict the ability of the Thai government to
produce new generic anti-retrovirals, thus obliging the country to use
patented versions, which cost ten times as much.15

New laws on seeds undermine livelihoods of


poor farmers
The vast majority of farmers in developing countries share seeds with
other farmers. Trading and exchanging seeds acts as a social safety
net, enabling farmers to select the strongest varieties and continually
improve on production and yields, spreading the benefits to the
whole community.
However, US and EU FTAs require the adoption of plant-breeder
rights legislation that removes the right to share seeds, thereby
making the livelihoods of the worlds poorest farmers even more
vulnerable, whilst increasing the market power and profit margins of
the worlds largest agribusinesses.
As a condition of signing a trade agreement, both the USA and EU
are asking developing countries to adopt UPOV 1991, the
international framework law on plant-variety protection that
prohibits farmers from selling or exchanging protected seeds. UPOV
1991 has been required in all US FTAs, and in most EU trade
agreements. Countries across the developing world are already
signing, including Bangladesh, Cambodia, Ecuador, Jordan, Mexico,
Tunisia, South Africa, and Viet Nam, and future trade and
investment agreements are only likely to increase the pressure.16
US FTAs go even further, pushing for patents on plants. This is the
strongest form of intellectual-property protection available for plants
not only limiting the rights of farmers to exchange or sell seeds, but
also to save and reuse seed they have grown themselves. The US
Morocco FTA requires the patenting of plants and all other FTAs
include a best effort clause to develop plant-patent legislation.17
Governments and agribusiness often justify stricter plant-variety
protection on the grounds that this will improve the access of agro-
export firms in developing countries to the latest plant varieties,
ensuring their competitiveness in global supply chains. However,
such access often does not work in the interest of poor producers.
Stricter legislation increases the market power of seed suppliers,
pushing up the prices and in some cases enabling international
companies to capture a larger segment of the profits from farming

Signing Away The Future, Oxfam Briefing Paper, March 2007 12


than poor farmers themselves. This occurred in Mexico, when
Monsanto and Delta and Pineland Co. (D&PL) introduced genetically
modified Bt Cotton after UPOV 1991 legislation was adopted under
NAFTA.18

Driving up agrochemical prices


As yields have increased dramatically in industrialised countries
through the intensive use of agro-chemicals, millions of farmers
across the developing world have been forced to use similar
production methods in order to compete. This has led to a high
dependence of small farmers on pesticides, with worrying
implications both for the environment, because of to the threat posed
to biodiversity, and for agricultural workers, who face an ever-
increasing incidence of pesticide poisoning. To participate in global
supply chains, many poor farmers depend heavily on agrochemicals
to meet production standards, with adverse environmental and
health implications. Rice farmers in Costa Rica currently spend an
average of 16 per cent of their production costs on agrochemicals,
while many other poor farmers, including those who grow bananas,
coffee, and potatoes, spend even more.19
Excessive data-protection rules in US FTAs, which block cheaper
generic versions, are likely to cause agrochemical prices to escalate,
redistributing value away from poor farmers and towards
agrochemical companies and driving farmers deeper into poverty.
Excessive data-protection rules are modelled on US domestic laws,
which have driven most US generic producers out of the market, and
left US prices among the highest in the world. For example,
Monsantos RoundUp herbicide, based on the agrochemical
glyphosate (the worlds most widely used agrochemical), usually
costs well over $50 per gallon in the USA, while the same RoundUp
brand in markets where there is competition from generics, such as
Costa Rica, can cost as little as $12 per gallon. Under the US
Dominican RepublicCentral America Free Trade Agreement (DR-
CAFTA) the prices of agrochemicals are expected to rise several fold.
While a decrease in the use of agrochemicals by small-scale farmers
might have the unintended benefit of promoting more sustainable
production methods, there is an obvious risk that price increases
would simply squeeze small farmers out of existing markets and
supply chains.

13 Signing Away The Future, Oxfam Briefing Paper, March 2007


Knowledge and biodiversity not protected
The double standards in the intellectual-property rights chapters of
most trade agreements are glaring. Whilst they extend the monopoly
rights of large corporations, they offer no such protection for the vast
amounts of knowledge held by farmers in developing countries. In
the USA and EU, patents can be granted even when they are based
on genetic resources taken from developing countries without the
prior informed consent of the local communities. To date, patents
have been granted on ayahuasca, barbasco, endod, kava, quinoa, and
turmeric, all of which were developed through selective breeding by
farmers from developing countries. Under these unjust rules, farmers
and local communities must stand by as their own knowledge and
genetic resources are accessed freely, and treated in laboratories in
developed countries, while ownership is conferred on foreign
companies through patents.
It gets worse. Under US FTAs including DR-CAFTA, USPeru and
USColombia FTAs, developing-country governments will no longer
be able to reject a patent application because a firm fails to indicate
the origin of a plant or show proof of consent for its use from a local
community.20 As a result, communities could find themselves forced
to pay for patented plant varieties based on genetic resources from
their own soil.
In many cases, these radical changes require developing countries to
overturn national biodiversity legislation. Costa Ricas Biodiversity
Law, for example, requires companies to submit a certificate of origin
when filing a patent application and recognises the right of
indigenous peoples and local communities to oppose any access by
companies to biological materials or knowledge from their territories
for cultural, spiritual, social, economic, or other reasons. All of these
provisions will be dismantled if DR-CAFTA is ratified by all parties
and comes into force.21
The EU, Australia, Canada, and New Zealand do not go as far as the
USA, as they do not prevent developing countries from creating their
own protection systems for protecting biodiversity and traditional
knowledge. However, just as with the rules on medicines, when a
countrys laws change to comply with a US trade and investment
agreement, all foreign companies can take advantage.

Making technological catch-up harder than ever


Access to technology has always been a key ingredient of economic
development. Historically, control over the growth process has taken
the form of a technological arms race between developing countries

Signing Away The Future, Oxfam Briefing Paper, March 2007 14


trying to acquire advanced foreign knowledge to build their
manufacturing base, and the developed countries trying to prevent
its outflow. As far back as 1719, when the UK was a front-runner in
industrialisation, countries that lagged behind technologically sent
industrial spies into the UK, smuggled out tools, and provided
special incentive schemes to entice highly skilled migrants. Due to its
flagrant appropriation of technologies during this period, the USA
was known as a bold pirate of intellectual property. In recent
decades, during their periods of fastest growth, countries including
Japan, Taiwan, and South Korea were each labelled the counterfeit
capital of the world. China now carries the title.22
By tightening copyright and other intellectual-property legislation via
FTAs, the USA and EU prevent other developing countries from
following in their footsteps, knocking out a vital rung on the
development ladder. American and European FTAs oblige
developing countries to enforce existing copyright legislation and
also to introduce stricter copyright laws that seriously compromise
the WTO principle of fair use of technological information. They
require countries to sign up to the World Intellectual Property
Organisations (WIPO) Copyright Treaty and, in the case of US FTAs,
enact legislation modelled on the US Digital Millennium Copyright
Act (DMCA). These treaties make it far harder for firms to access and
use technologies on which copyrighted materials are based, even if
they are used purely as the basis for researching and developing new
products.
According to the Commission for Intellectual Property Rights, a panel
of world-renowned intellectual-property experts, developing
countries would probably be unwise to endorse the WIPO Copyright
Treaty, unless they have very specific reasons for doing so, and
should retain their freedom to legislate on technological measures. In
particular, [] legislation such as the DMCA shifts the balance too
far in favour of producers of copyright material at the expense of the
historic rights of users. Its replication globally could be very harmful
to the interests of developing countries in accessing information and
knowledge they require for their development.23
As of January 2007, 61 countries had ratified the WIPO Copyright
treaty, including some of the worlds poorest countries: Burkina Faso,
Mali, and Gabon. Through FTAs with the USA, countries including
Singapore, Bahrain, and Morocco have already adopted DMCA-type
legislation.24

15 Signing Away The Future, Oxfam Briefing Paper, March 2007


Box 1: Buying influence: new rules are worth paying for
For large corporations, the new rules are clearly worth paying for. On
copyright alone, the US government estimates that tightened rules could
increase the revenues of US-owned corporations by $250bn per year.
Extending patents would similarly increase profits. For an individual
pharmaceutical or agrochemical company with product sales of $2.5bn a
year, each additional day that a patent is extended is equivalent to an extra
$6.8m of sales.
For this reason, individual companies are prepared to spend substantial
amounts of money influencing trade and investment negotiations. The
Pharmaceutical Research and Manufacturers of America spends about
$100m a year attempting to shape global rules on intellectual property to
their advantage, putting aside $17.5m for lobbying on international trade
agreements, and a further $1m to create an echo chamber of economists
supporting their position.25

Signing Away The Future, Oxfam Briefing Paper, March 2007 16


3 Undermining poor peoples access
to services
The services sector encompasses all economic activities that do not
produce a good; for example bankers, hairdressers, builders,
supermarkets, hotels, airlines, electricity companies, doctors, and
teachers. Services are an important source of employment and
income in developing countries, often exceeding industry and
agriculture. In 2001, the services sector accounted for an average of 52
per cent of GDP in developing countries.26
Effective governance of the services sector is crucial for sustainable
and equitable development. Governments must regulate in a way
that both serves the public interest and promotes economic
development. Unless the services sector is properly regulated,
opening it to foreign suppliers can seriously damage the chances for
domestic firms to compete, thereby denying developing countries the
opportunity to create wealth and threatening poor peoples access to
public services.
Services sectors are growing rapidly in developing countries and US
and EU companies are lobbying hard for greater access to the new
markets. According to Peter Mandelson, Europes companies know
that their competitiveness depends on access to these rapidly
expanding markets.27
Powerful US and EU financial-services companies fought hard to
introduce services onto the WTO agenda and tried to gain
liberalisation commitments. However, despite considerable pressure,
developing countries made relatively few commitments, and
succeeded in preserving the right to effectively regulate the sector.
Having failed to get what they wanted at the WTO, the US and EU
are now aggressively pursuing services liberalisation through
bilateral and regional agreements. These risk locking developing
countries into a model of services development that places the
interests of foreign investors above the public interest. They also
make new regulations binding, which means they are fixed through
the trade agreement, and open to trade sanctions if they are changed.
This renders it extremely costly to change course, even if such a
change is in the public interest.

17 Signing Away The Future, Oxfam Briefing Paper, March 2007


Pricing poor people out of credit
The financial-services sector is often singled out for liberalisation in
US, EU, and Japanese FTAs. Developing countries are being pushed
to open core banking and insurance services to increased
participation by foreign companies and to make binding
commitments on regulations governing the sector.28
US FTAs are the most far-reaching: they give foreign investors new
rights to establish a commercial presence, and oblige governments
to remove any prior restrictions requiring investors to establish
subsidiaries rather than open their own branches. As a direct result of
FTAs, US financial-services companies now operate branches in:
Chile, El Salvador, Honduras, Costa Rica, Dominican Republic,
Guatemala, Morocco, and Nicaragua.29
Developing countries liberalise financial services in the hope of
introducing greater competition and efficiency, which in turn should
improve poor peoples access to finance. However, the opposite often
occurs. Recent studies by the International Monetary Fund and
United Nations show that opening up the banking sector leads
foreign banks to cherry-pick only the most lucrative customers in
the economy, leaving poorer and higher-risk customers for local
banks. This in turn reduces the profitability of local banks, which
previously provided finance to poor segments of the population, and
drives them out of business. As a result, small and medium-sized
businesses (a vital source of employment) and many of the poorest
people are left without access to finance.30
In Mexico, the financial-services sector was liberalised in 1993
through domestic legislation that accompanied NAFTA. By 2000,
foreign ownership of the banking system had increased to 85 per
cent, but lending to Mexican businesses had dropped dramatically
from 10 per cent of GDP in 1994 to a mere 0.3 per cent in 2000.31 The
impact was devastating among poor people in rural areas. In
southern Mexico, the number of small farms with access to credit
halved, and where finance was available it came only at exorbitant
rates. In the state of Sonora lack of access to finance drove 70 per cent
of community farmers to sell out to large-scale commercial
enterprises.32

Retail: driving out local business, endangering


small-scale farmers livelihoods
Distribution services, which include retail and wholesale trade, are
important to developing-country economies and central to poor
peoples livelihoods. In India, retail is the largest private industry,

Signing Away The Future, Oxfam Briefing Paper, March 2007 18


contributing 10 per cent of GDP, and the second largest employer
after agriculture, taking up 67 per cent of the workforce.33
FTAs, notably with the USA, open the retail sector to foreign
investment in an unprecedented way. All countries that have signed
US FTAs have committed to remove previous restrictions, including
limitations on foreign equity participation, economic needs tests, and
broad and numerous product exclusions.34
The potential for foreign investment in the retail sector to contribute
to development depends on effective regulation. In its absence,
foreign retail companies can rapidly drive local competitors out of the
market and push poor producers out of domestic supply chains.
Aware of these dangers, many developing countries carefully
regulate investment in the retail sector. In China for example,
government regulations have encouraged foreign retail companies to
source 95 per cent of their supplies locally.35 Yet this is precisely the
sort of regulation that the new trade and investment agreements seek
to ban.

Box 2: Markets go super in Latin America


In Latin American countries, multinational companies own an average 70
80 per cent stake in the top five supermarket chains, which together
account for 65 per cent of total supermarket sales across the region. They
rely more heavily than local firms on imported, branded products and even
where they source products locally, they require volumes and standards
that smaller farmers often cannot meet, driving poor producers out of
supply chains. The impact on rural livelihoods is significant in the
Brazilian dairy sector alone, the entry of large supermarkets and the
consolidation of supply chains drove 60,000 small dairy farmers out of
business.36

Utilities sector under threat


Opening up public utilities to foreign investors is notoriously difficult
to do effectively, and requires a strong and sophisticated regulatory
environment that takes time to establish. In Bolivia, a weak
regulatory system allowed a consortium of foreign investors
contracted to take over the public water system to raise rates to such
an extent in the year 2000, that poor families were spending a quarter
of their earnings on water.
To date, FTAs have not required developing countries to make
significant liberalisation commitments in areas of essential services
such as health care, education, and water. However, FTAs are
restricting the right of governments to take a gradualist approach to
opening up the utilities sector, which means that they cant open it up

19 Signing Away The Future, Oxfam Briefing Paper, March 2007


to domestic investors before foreign investors, and prevents them
from developing an effective regulatory framework over time. In
some US FTAs, developing countries are committing themselves to
allowing foreign investors access to public utilities the moment the
sector is opened up to domestic private companies. A leaked version
of the EUs draft negotiating mandates for FTAs with ASEAN, India,
Central America, the Andean countries, and South Korea shows that
the EU is seeking similar provisions, particularly for water, transport,
and power. Most FTAs also require countries to introduce binding
regulations on investment in services as soon as the sector is opened
up, which makes developing countries vulnerable to possible trade
sanctions if they subsequently change the rules.
Restricting the room to manoeuvre of developing countries
governments risks locking developing countries into systems of
service provision that reduce poor peoples access to basic utilities.

Migration: officially a one-way street


Remittances from workers are a major source of capital inflows for
many developing countries. In 2003 they were worth $ 93bn, nearly
double the amount of development aid. In many cases they are far
larger than foreign direct investment.37 In Tonga, remittances in 2004
were equivalent to over 40 per cent of GDP, and 150 per cent of total
exports.38 Migration has to be carefully regulated however, as it can
lead to a severe brain drain, a particular danger in the health and
education sectors, undermining economic and social development.
Despite the aggressive interest of developing countries in skilled
migration, developed countries often walk away from the negotiating
table with a far greater level of concessions. Under NAFTA, only
5,500 professional Mexicans a year are allowed to enter the USA and
Canada, whilst American and Canadian professionals are able to
enter Mexico relatively easily. In 2001, more than 50,000 Americans
and Canadian professionals entered Mexico, almost 25 times more
than Mexican professionals going in the opposite direction.39
The JapanPhilippines FTA is the only FTA where a developed
country has made significant concessions on migration, allowing the
entry of caregivers from the Philippines. But Japanese newspapers
suggest that in practice, migration will be limited to 500 people per
year.40
As a result, migration to developed countries continues to occur on a
large scale through unofficial routes, which undermines the ability of
developing countries to manage it. It places migrant workers in
extremely precarious positions where their labour rights are not

Signing Away The Future, Oxfam Briefing Paper, March 2007 20


upheld and wages and conditions are often deplorable. This also
undercuts wages and conditions for workers in host countries.

21 Signing Away The Future, Oxfam Briefing Paper, March 2007


4 Investment: tying the hands of
government
The investment chapters of FTAs together with separately negotiated
bilateral investment treaties (BITs) ensure that the access and
activities of foreign investors in developing countries are unfettered,
and many provide a powerful system of international arbitration to
ensure that the expanded rights of foreign investors are vigorously
enforced.
During the 1990s, industrialised countries pushed hard to introduce
binding investment rules through the Organisation for Economic Co-
operation and Development, advocating the creation of a Multilateral
Agreement on Investment. When this effort collapsed in 1998 due to
internal disputes, attention shifted to the WTO where the EU in
particular tried to insert talks on investment into the Doha Round of
negotiations. Developing countries successfully opposed this
initiative.
The ground that developing countries gained at the WTO is
undermined through BITs and FTAs. These have proliferated in the
last two decades and now involve almost every country in the world.
Bilateral investment treaties undermine the ability of host
governments to effectively regulate foreign direct investment (FDI) to
support economic development. A growing number of these treaties
allow investors to sue governments in international commercial
courts for compensation because of regulatory changes, even when
these are in the public interest.
Developing countries are entering new agreements in the expectation
that FDI will increase as a result, but there is no evidence that this is
the case. Brazil, for example, is one of the worlds largest recipients of
FDI but has not ratified a single bilateral investment agreement.41
African countries have between them signed over 1000 bilateral
investment treaties, but receive less than four per cent of global FDI.42

Making it harder for investment to boost


economic development
Flows of foreign investment entering developing countries are at an
all-time high, worth $334bn in 2005 alone.43 They are concentrated in
a few industries, particularly oil and gas, telecommunications,
financial services, and real estate and most FDI flows into a relatively

Signing Away The Future, Oxfam Briefing Paper, March 2007 22


small group of developing countries. But high volumes of FDI do not
guarantee development.
Countries with economies that have grown rapidly, particularly the
Asian tigers, provided foreign investors with incentives to support
economic upgrading. These countries screened foreign investors, only
allowing entry to those that met the developmental needs of their
economies. They also required them to fulfil performance
requirements, to enter joint partnerships with local firms, transfer
technology, upgrade the skills of employees, and buy intermediate
inputs from local suppliers, stimulating production in the wider
economy. As a result, they were able to develop industries that are
now world leaders, creating jobs and contributing to rapid poverty
reduction.
However, the ever-stricter rules in BITs and FTAs are tying the hands
of those who would follow their path, banning them from using the
policies that worked so successfully for the Asian countries. Recent
treaties, including those negotiated by the USA, Canada, and Japan,
provide investors with pre-establishment rights that prohibit
governments from screening foreign investors.44 In addition, a
growing number of investment chapters and treaties prevent
governments from regulating foreign investment once it enters the
economy, by banning the use of all performance requirements in all
sectors including mining, manufacturing, and services.45

Box 3: Undermining the ability of governments to address inequality


Some developing-country governments have effectively used performance
requirements to reduce gender and racial inequalities. Because women
tend to be employed in electronics, textiles, and garments industries to
which foreign investors are often attracted, regulation of FDI can have a
substantial impact on the significant disparity between the wages earned
by women and by men. In South Korea for example, effective regulation of
foreign investment provided firms with incentives to progressively add
value to exports, reducing wage inequalities between women and men.46
Performance requirements have also been used to tackle entrenched
economic inequalities between racial groups. In South Africa, the Black
Economic Empowerment program rewards firms for appointing black
executives, establishing supplier relationships with local black-owned firms,
and promoting employment equity within the firm.47
The WTO Agreement on Trade Related Investment Measures (TRIMS)
already limits the use of performance requirements; many FTAs and
bilateral investment treaties exacerbate the situation.

23 Signing Away The Future, Oxfam Briefing Paper, March 2007


Compensating foreign investors even when
they violate the public interest
Most national investment laws achieve a balance between corporate
and citizens rights by agreeing that the government will compensate
investors in situations of direct expropriation any act whereby
government seizes their assets or otherwise completely destroys the
value of their investment but not for routine policy making, such as
increasing taxes or changing environmental regulations. FTAs and
BITs have upset this balance by radically extending the rights of
foreign investors and severely undermining the rights of
governments and their citizens.
More than 170 countries have now signed international investment
agreements that provide foreign investors with the right to turn
immediately to international investorstate arbitration to settle
disputes, without first trying to resolve the matter in national
courts.48 Such arbitration fails to consider the public interest, basing
decisions exclusively on commercial law.
Foreign investors, and even equity holders, can sue even when the
government is acting in the public interest. And taxpayers must foot
the bill for damages to investors profits, including anticipated future
profits. The cost can be extremely high. Current outstanding claims
against Argentina are estimated to be $18bn.49 Cases have been
lodged against governments for increasing value-added taxes, re-
zoning land from agricultural to commercial use, and regulating
hazardous waste facilities, on the grounds that these actions had
adverse consequences on profits of foreign investors50.
Investors automatic recourse to international arbitration, enshrined
in BITs and FTAs, threatens to undermine the rule of law in
developing countries by circumventing the national legal system,
regardless of how effective that system is. It also presents an evident
double standard, as national investors have no such recourse. Even
when contracts expressly restrict recourse to the national legal
system, foreign investors may still have the option of international
arbitration. In one water privatisation dispute against Argentina, the
contract waived the companys right to use the USArgentina BIT in
the event of a dispute. Yet the international arbitration tribunal held
that this waiver should not prevent the US-based Azurix
Corporation, the primary shareholder in the local subsidiary, from
mounting its own international treaty claim for damages.51
Not only is the legal basis for investment arbitration decisions loaded
against public interest, but so are the proceedings. Despite the fact
that many arbitration panels are hosted at the World Bank and

Signing Away The Future, Oxfam Briefing Paper, March 2007 24


United Nations, two institutions with a public commitment to
accountability, the investment arbitration system is shrouded in
secrecy.52 It is virtually impossible to find out what cases are being
heard, let alone the outcome or rationale for decisions.53 As a result,
there is no body of case decisions to inform developing-country
governments when drafting investment agreements.
The only group privy to this information is an increasingly powerful
select group of commercial lawyers, whose fees often place them out
of reach of developing-country governments. These lawyers routinely
send letters to foreign investors pointing out opportunities to claim
compensation from developing countries under international
investment agreements.54

Box 4: Corporate claims fleece taxpayers


In Mexico, a successful case was brought for refusing to renew an annual
permit for a foreign investor to operate a hazardous waste storage facility,
following protests by local communities. The foreign investor claimed
compensation and the tribunal ruled in its favour, noting that under NAFTA,
there is no principle stating that regulatory administrative actions are per
se excluded from the scope of the Agreement, even if they are beneficial to
society as a whole such as environmental protection.
In Argentina, during the 20012002 financial crisis, amid dramatic
increases in unemployment and a precipitous decline in the value of
household savings, government emergency measures forced foreign
investors to stop charging dollar-equivalent rates for basic utilities such as
water and gas. Thirty-nine groups of foreign investors have lodged
compensation claims, some successfully, for revenues lost. Current
outstanding claims are estimated at $18bn.55
Corporations dont always get large settlements. In the Bolivia water case
noted in on page 18, the investors launched a case arguing that the
government had failed to protect their investment, thus violating the
bilateral investment treaty. The international tribunal ruled in favour of the
international investors, but only awarded them nominal compensation,
arguing that although the claim should be upheld on the basis of
commercial law, the government had so clearly acted in the public interest
that a nominal settlement was appropriate.56

Increasing the risk of financial crisis


Trillions of dollars move around the world every day as short-term
speculative investment, largely in stock markets across the developed
and developing world. These large flows of capital can provide
much-needed funds for local businesses, but as many developing
countries discovered in the Asian financial crisis of the late 1990s,
without effective regulation, such portfolio flows can destabilise the
economy, plunging millions of people into poverty overnight.57

25 Signing Away The Future, Oxfam Briefing Paper, March 2007


Some US FTAs restrict the ability of governments to regulate capital
flows. For example, Chile and Singapore made significant
concessions in their recent FTAs with the USA, limiting the use of
capital controls to situations of national emergency.58 Nobel prize-
winning economist Joseph Stiglitz has been outspoken on this aspect
of FTAs, arguing that such restrictions expose developing-country
economies to undue risks.59 Financial crises can severely impede
economic development and invariably hits poor people hardest. In
Argentina, poverty rose to over 53 per cent during the financial crisis
of 20012002, and millions of people lost their life savings.

Signing Away The Future, Oxfam Briefing Paper, March 2007 26


5 Employment: the elusive quest for
decent work
Politicians often cite the claim that free trade and investment
agreements will create jobs and raise wages. Most poor people,
whether they live in urban or rural areas, depend at least in part on
wage labour to earn a living. Of the nearly one billion poor people
working in agriculture, 40 per cent work on plantations and as day
labourers. These waged agricultural workers are among the poorest
of all occupational groups, with more than 60 per cent living below
the poverty line.60
The rules in many FTAs undermine the potential of trade and foreign
investment to generate decent employment or increase wages over
the long term. Despite a rapid expansion of trade and investment
under NAFTA, Mexico has seen an overall decline in both
agricultural and formal manufacturing employment and a rapid
increase in inequality. Real wages in Mexico were lower in 2004 than
in 1994, even for the maquiladora sector. This setback in wages is not
wholly attributable to NAFTA, having its roots in the debt crisis and
devaluation of the peso, but it is surprising that the rapid growth in
manufactured exports has not led to a rise in wages, even in export
sectors, especially given the rise in labour productivity.61
Liberalising trade and opening up to investment can only be a
powerful force for employment generation if effectively regulated
and carefully tailored to the long-term needs of the economy. FTAs
threaten to strip developing countries of the very policy instruments
they need to make investment and trade work for development.62

Box 5: NAFTA: no panacea for employment


In Mexico NAFTA provided increased access to the US market, triggering a
dramatic increase in foreign direct investment into the agricultural and
manufacturing sectors. However, in the agricultural sector, much of the
investment went to farms that were relatively capital-intensive, and failed to
create many jobs. In the first ten years of NAFTA, Mexico lost 1.3 million
jobs in agriculture.63 In manufacturing, significant numbers of jobs were
created initially, particularly in maquiladora assembly plants, which
generated an additional 800,000 jobs by 2001.64 However, since the
assembly plants could only compete as long as Mexicos labour remained
relatively cheap, they became vulnerable to increasing competition from
China. Two hundred thousand manufacturing jobs were lost between 2001
and 2004 alone largely due to firms relocating to China.65

27 Signing Away The Future, Oxfam Briefing Paper, March 2007


Gender inequality remains
Promoting a model of development that relies on cheap and flexible
labour for competitiveness instead of investing in education and
human resources can reinforce existing gender inequality. Women
form the majority of workers in many of the sectors that have been
boosted by trade and investment agreements, such as the Mexican
maquiladora factories and the Andean agro-export sector. (In the
asparagus farms of Peru, 72 per cent of workers are women.66)
New factories bring employment opportunities, in some cases
providing jobs for women who have never been in paid employment
before. But even though wages and conditions are often slightly
better than similar domestically owned factories, the conditions can
be deplorable and labour rights are often ignored.
Wages remain very low and conditions are exploitative and
precarious. Violations of labour rights are common and unions are
often barred. In the maquiladora factories women are routinely forced
to take pregnancy tests when applying for jobs. As a single mother
said when a company in Mexico attempted to reduce her wages: My
supervisor told me to shut my mouth if I care about my two children.
He said: Think about how you are going to provide for them if we
sack you.67
Employees face low job security, long hours, poor working
conditions, and a lack of health and welfare benefits. Long working
hours particularly affect women and children: women are forced to
choose employment to feed their children, but this requires them to
spend long hours absent from the house. A nursery worker in
Colombia described women workers in agro-industry bringing in
their children at 4 in the morning and picking them up at 10 at night.
Such forced choices go against all principles of people having a right
to family life.68
Ultimately, the new jobs do not enable women to pull themselves and
their families out of poverty.

Ineffective labour clauses make little difference


in reality
Labour provisions appear in almost all US and EU bilateral and
regional free trade agreements, but parties merely commit to uphold
domestic labour laws, irrespective of their quality or current levels of
enforcement. There is no requirement for International Labor
Organization (ILO) standards to be incorporated into domestic law
and no enforceable obligations are placed on foreign investors.

Signing Away The Future, Oxfam Briefing Paper, March 2007 28


The USJordan FTA is one example. The agreement has been upheld
by the US government as having enforceable labour and environment
standards, but the text of the labour provision is weak, requiring only
that parties strive to ensure that domestic laws are consistent with
internationally recognised labour rights. Moreover, even the weak
standards that exist are not effectively enforced, even though unlike
subsequent US FTAs they can be enforced under the agreements
dispute-settlement mechanism.
Working conditions in factories across Jordan, including those
supplying Wal-Mart, are atrocious especially for immigrant
workers. If we asked for money, they hit us. In the four months I was
in Jordan, they didnt pay us a single penny. When we asked for our
money and for better food, they were very angry at us. We were put
in some sort of jail for four days without anything to eat. And they
forced us to go back to Bangladesh, says Nasima Akhter, a 30-year-
old Bangladeshi migrant worker. 69
One trade agreement that seems to have improved labour standards
is the USCambodian Textile Agreement. Under this agreement,
improved access to the US market is conditional on the enforcement
of internationally recognised labour rights, independently monitored
by the ILO. This provision prevents the labour clause from being
hijacked for protectionist purposes. Wages, working conditions, and
respect for workers rights have improved measurably, and foreign
investors have benefited too from higher productivity and quality,
and lower rates of accidents, staff turnover, and absenteeism.70
However the agreement has not succeeded in securing respect for the
right of workers to organise.

29 Signing Away The Future, Oxfam Briefing Paper, March 2007


6 Faster and deeper: unprecedented
tariff liberalisation in developing
countries
The hypocrisy of wealthy countries is most evident in the tariff
provisions of FTAs. Simply to maintain their current access to rich-
country markets, developing countries are being asked to liberalise
tariffs to an astonishing degree, far beyond anything proposed at the
WTO. They are being pushed to eliminate the majority of in some
cases all agricultural and manufacturing tariffs, freeze remaining
tariff lines at applied rates, and reduce non-tariff barriers. In many
cases they are being asked to undertake all this liberalisation merely
to secure current levels of access to developed-country markets.
Meanwhile, unlike at the WTO, industrialised countries show little
willingness to negotiate reductions of agricultural subsidies, which in
crops like cotton, dairy, and sugar lead to dumping on world
markets, with damaging impacts on farmers in developing countries.
They also insist on retaining a series of non-tariff barriers to restrict
market access. The implications for poverty reduction are significant.

Farmers driven into deeper poverty


Seventy per cent of the worlds poorest people live in rural areas,
depending largely on food production for their livelihoods.71
Inappropriate tariff liberalisation, especially while Northern countries
continue to subsidise and dump their export crops overseas,
threatens to push some of the worlds poorest people over the edge.
Under EPAs, 75 of the worlds poorest countries across Africa, the
Caribbean, and the Pacific are being put under pressure to eliminate
tariffs on substantially all trade with the EU, their largest trading
partner.72 Already, in their FTAs with the USA, Central American
countries and the Dominican Republic have agreed to reduce and
bind all agricultural tariffs at zero, with the exception of only one
tariff line: white corn.73 Peru and Colombia were allowed no
exceptions for tariff elimination in their FTAs with the USA.
Some FTAs even restrict developing countries right to use
agricultural safeguard mechanisms to limit imports in the face of a
sudden fall in prices, expressly prohibiting use of the mechanism
currently in the WTO Agreement on Agriculture or in any future
WTO agreement. Under DR-CAFTA and the US FTAs with Peru and
Colombia, the agricultural safeguard mechanism can be triggered
only by volume increases, not a fall in prices. This severely limits the

Signing Away The Future, Oxfam Briefing Paper, March 2007 30


mechanisms effectiveness, particularly given the low prices of highly
subsidised US agricultural exports. It cannot be applied once the tariff
is completely phased out, and can only be used for a very limited
number of products.
The impact on rural livelihoods and food security from such deep
tariff liberalisation can be swift and devastating. In Mexico, an
estimated 18 million people depend on maize production. After
NAFTA, imports of maize from the USA doubled within two years.
Thanks in part to higher efficiency but also to high US subsidies,
maize was exported to Mexico at prices 30 per cent or more below the
cost of production. Poor people living in rural areas bore the brunt of
the adjustment. As maize prices fell, producers with large irrigated
farms were able to switch to other crops, but the poorest farmers had
no alternative but to increase maize output in order to secure
sufficient income to meet their basic needs, further feeding the
downward pressure on prices.74
Other FTAs between industrialised and developing countries are
only now being negotiated or are coming into force, but a similar
impact is feared:
In West Africa, recent impact assessments published by the
European Commission in advance of EPAs, estimate that
liberalisation could lead to import surges for a number of
products; 16 per cent for onions, 15 per cent for potatoes, 17 per
cent for beef, and 18 per cent for poultry. Since these products are
a source of livelihood for many small producers, the adverse
impact on poverty would be substantial.75
In Central America rice is an important food staple, along with
corn and beans, and is the mainstay of the diet of many Central
Americans, particularly poor people. Under DR-CAFTA,
governments in Central America have agreed to a system of
quotas that will allow increasing volumes of rice to be imported
from the USA at a price 20 per cent below the price of production,
due to heavy US subsidies. An estimated 80,000 rice farmers may
lose their livelihoods.76
Impact assessments of the USColombia FTA show that the
agricultural sector could experience a 57 per cent reduction in
income and a 35 per cent reduction in employment in nine
agricultural sectors.77

31 Signing Away The Future, Oxfam Briefing Paper, March 2007


Box 6: Cotton no longer white gold
The proposed FTA between the USA and Peru threatens to destroy the
livelihoods of thousands of Peruvian cotton farmers in a flood of heavily
subsidised US cotton. Twenty-five thousand US cotton producers receive
approximately $3.5bn per year in subsidies; their 30,000 Peruvian
counterparts receive no subsidies, and have few alternative ways to make
a living. The USA is already the main cotton supplier to the Andean
community. Under the FTA, Peru will have to eliminate the tariff on US
cotton, exposing farmers to even greater competition, and threatening their
livelihoods.
Lily Arteaga Cabrera grows cotton in Pisco, in the south-east of Peru. She
gets up at 5 in the morning to prepare food for the family and then goes to
the cotton field at 8, where she stays until 6 in the evening. Cotton earns
her family just enough to eat. It is hard work and they are locked into a
cycle of debt, borrowing to plant and working eight months up to harvest
when they can pay it off: How are we going to live now? We are going to
die of hunger.
Her colleague, Luis Chavez Valentin, from the same cotton-growing area,
agrees: When the subsidised US cotton enters we are simply not going to
have enough money to live. Cotton is no longer white gold: now it is a
symbol of poverty.

Consumers: the real winners?


Proponents of trade liberalisation argue that, even if cheap imports
hurt some poor producers, poor consumers will benefit. In reality,
this depends on the ability of the government to regulate the market
effectively and ensure competition.
When a few large importers control the market, as a result of weak
domestic competition, consumers may not see the benefits of lower-
cost imports. In Honduras, for example, the top five importers
currently control 60 per cent of the rice trade. When rice tariffs were
lowered, the import price fell by 40 per cent between 1994 and 2000.
The real consumer price, however, actually rose by 12 per cent
between 1994 and 2004. In Ecuador, a cartel of sugar refiners failed to
pass on lower sugar prices to consumers following import
liberalisation in the early 1990s.78
Heavy dependence on food imports entails major risks. Highly
volatile commodity prices on world markets, exacerbated by sudden
changes in subsidy policies, can dramatically affect consumer prices.
World maize prices are rising rapidly in response to demand for
biofuels, partly driven by increased subsidies for biofuel production.
Consumers in Mexico, which after NAFTA is highly dependent on
imported maize, have taken to the streets as the price of tortillas, their

Signing Away The Future, Oxfam Briefing Paper, March 2007 32


staple food, increased by 40% in three months. In the face of such
price rises, governments can do little, as domestic agricultural
production cannot easily replace imports, at least in the short term.79

Industrialised countries maintain barriers to


agricultural exports
Deep liberalisation by developing countries in FTAs is not
reciprocated. Both the USA and EU have given minimal tariff
concessions in FTA negotiations, only liberalising in the few
agricultural sectors that do not compete directly with their own
producers.
For example:
Lebanon is one of the worlds most competitive producers of olive
oil, yet 95 per cent of the olive oil sold in world supermarkets
comes from Spain, Italy, and Greece. High levels of EU protection
are responsible. The EU subsidises its olive-oil producers by
$2.3bn each year and maintains a series of import quotas to
protect them from more competitive producers. For this reason,
Lebanon was only able to gain extremely limited concessions for
untreated olive oil through the EULebanon Association
Agreement.80
Under the EUJordan Association Agreement, the EU has secured
limits on imports from Jordan of beans, tomatoes, strawberries,
sweet peppers, roses, and carnations all products that Jordan
produces more competitively than the EU. Some sensitive imports
are subject to timetables arranged such that Jordan can only
export during the off-season for EU producers. This severely
curtails Jordans export potential as the quotas come into force at
the precise time when Jordan has seasonal over-production of
crops, such as cucumbers and grapes. 81
Under DR-CAFTA, competitive Central American sugar-
producing countries hoped to gain greater access to the US
markets. Although sugar makes a negligible contribution to the
US economy, it is protected by high tariffs, tariff-rate quotas, and
a guaranteed price. The quota expansions given to Central
America under DR-CAFTA are equivalent to only one per cent of
US production, and less than three per cent of Central American
production.82 Only a few exporters from Central America will
benefit.

33 Signing Away The Future, Oxfam Briefing Paper, March 2007


Box 7: Who captures the gains?
In some sectors, companies based in industrialised countries own so much
of the value chain that the rich countries still gain more when they open up
their agricultural market to exports from developing countries. Jeffrey Levin
from the US Association of Food Industries used this argument to
persuade the US government to open to asparagus imports under the US
Peru FTA:
The vast majority of the value chain generated by sales of Peruvian
asparagus in this market remains in this country [the USA]. For example, in
2003, the value chain for imports of fresh asparagus from Peru was worth
approximately $300 million. Of that total, approximately 70 per cent
remained in US hands, including air, sea and land carriers, importers,
ports, storage facilities, distributors, wholesalers and retailers. In other
words, for every dollar spent by a US. consumer on fresh asparagus
imported from Peru, 70 cents remains in the USA Moreover, even of the 30
percent that reverts back to the country of origin, a substantial portion is
spent on US inputs such as seeds and fertilizers.83

Deep liberalisation threatens a manufacturing


future
Historical evidence shows that in order for countries to develop, they
must change the composition of their exports, thereby reducing their
vulnerability to shocks and generating employment. Rich countries
not only export more than poorer ones they export products with
more added value. All advanced countries as well as the Asian tigers
used manufacturing tariffs to protect their nascent industries. They
only fully exposed firms to international competition when they were
strong enough to compete on world markets.84
Many FTAs, including the EUs proposed EPAs, require developing
countries to reduce the majority of their industrial tariffs to zero and
to freeze all other tariffs. The implications are serious. Developing
countries are being denied the right to use tariff policy to develop an
industrial future, and existing manufacturing jobs are also
jeopardised. While not all poor countries are likely to follow in the
footsteps of Japan or the USA, an active role for the state is invariably
required for long-term development. The level and nature of state
intervention varies from country to country and can only be decided
by effective, accountable governments, not imposed via unfair trade
and investment rules.

Signing Away The Future, Oxfam Briefing Paper, March 2007 34


Restricted access for manufactured exports
At the same time as demanding rapid liberalisation in developing
countries, rich countries maintain a series of non-tariff barriers that
restrict access to their markets. The main barrier takes the form of
rules of origin. These rules demand that a particular product either
originates from, or has undergone sufficient processing in, the
partner country in order to qualify for preferential access. This is
designed to ensure that products are not produced elsewhere and
then just shipped through the partner country to take advantage of
preferences.
However, the EU and USA have made rules of origin unduly
complex in FTAs. In the USSingapore FTA, for example, there are
more than 240 pages of product-specific rules of origin.85
Rules of origin are often designed to support US and EU industries.
In NAFTA, textiles exports to the USA are subject to yarn-forward
and fibre-forward rules of origin. For clothing producers, this means
that they must buy their textiles from within the free trade area to
qualify for preferential access to the US market, providing a captured
market for US textile manufacturers and fabric exporters.86
Similarly, in the Pacific, the EUs rules of origin relating to tuna mean
that even fish caught in a Pacific countrys territorial waters are not
deemed to have originated in the Pacific unless caught by an EU or
Pacific vessel. Because of the prohibitive expense of purchasing large
tuna-fishing vessels, the rules encourage Pacific nations to give
fishing access to EU boats, effectively serving as a subsidy to the EU
fishing fleet and hindering the development of the Pacifics canning
industry, which has to purchase fish from the relatively expensive EU
fleet.87

35 Signing Away The Future, Oxfam Briefing Paper, March 2007


7 Turning the tide: putting trade and
investment at the service of
development
The balance of power in NorthSouth negotiations is tipped heavily
in favour of rich countries and large, politically influential
corporations. Small businesses, trade unions, non-government
organisations, womens groups, and indigenous peoples have very
few mechanisms for participation, and their rights and needs are
largely ignored.
Rich countries are using bilateral and regional trade and investment
agreements to extract concessions that they are unable to obtain at the
multilateral level, where developing countries can band together and
hold out for more favourable rules. Rich countries consider these new
agreements to be stepping stones to future multilateral agreements,
as the EU declared; in practice they are a means to undermine the
resolve of developing countries.
Much of the recent debate and controversy over trade negotiations
has revolved around tariff liberalisation, the trade-distorting practices
of rich countries, and the policy space that developing countries need
to promote food security and industrial development. Tariff policy is
a key development tool and developing countries understandably
oppose the deep liberalisation that rich countries press for at the
WTO and through FTAs.
However, the new generation of agreements extends far beyond this
traditional area of trade policy, imposing a damaging set of binding
rules in intellectual property, investment, and services with more far-
reaching consequences for development and livelihoods.
New agreements on intellectual property reduce poor peoples access
to life-saving medicines, push the prices of seeds and other farming
inputs beyond the reach of small farmers, and make it harder for
developing-country firms to access new technology. New rules on
liberalisation of services threaten to drive local firms out of business,
reduce competition, and extend the monopoly power of large
companies.
New investment rules in BITS and FTAs prevent developing-country
governments from requiring foreign companies to transfer
technology, train local workers, or source inputs locally. Under such
conditions, investment fails to build national linkages, create decent
employment, or increase wages, and instead exacerbates inequality.

Signing Away The Future, Oxfam Briefing Paper, March 2007 36


The investment chapters of free trade agreements and bilateral
investment treaties allow foreign investors to sue for lost profits,
including anticipated future profits, if governments change
regulations, even when such reforms are in the public interest.
The overall effect of these changes in the rules is to undermine
economic governance, transferring power from governments to
largely unaccountable multinational firms, and robbing developing
countries of the ability to gain a favourable foothold in the global
economy.
It is in nobodys long-term interest to have a global economy that
perpetuates social, economic, and environmental injustice. In order to
turn the tide and put trade and investment at the service of
development, Oxfam believes that trade rules, whether multilateral,
regional, or bilateral, should:
Recognise the special and differential treatment that developing
countries require in order to move up the development ladder.
Enable developing countries to adopt flexible intellectual-
property legislation that makes full use of safeguards to ensure
the primacy of public health and agricultural livelihoods over
patent rights, restricts the patenting of life forms, and protects
traditional knowledge and biodiversity.
Exclude essential public services such as education, health, water
and sanitation from liberalisation commitments, and allow
governments to regulate effectively foreign investment in service
sectors in order to promote the public interest.
Recognise the right of governments to impose capital controls on
foreign investment and performance requirements that encourage
joint ventures, technology transfer, and local sourcing, as well as
incentives to improve labour practices.
Include enforceable commitments by governments to protect and
promote core labour standards, as set down in the ILOs
Declaration on Fundamental Principles and Rights at Work, and
commitments to extend this progressively to cover workers,
particularly women, in precarious employment.
Exclude agricultural tariff lines from negotiations when
liberalisation threatens to undermine food security and rural
livelihoods, and recognise the right of developing countries to use
permanent safeguards that are triggered on the basis of both price
and volume.

37 Signing Away The Future, Oxfam Briefing Paper, March 2007


Enable developing countries to use tariffs, subsidies, and other
measures in support of industrial policy and to modify them as
their economies develop.
Ensure mechanisms for extensive participation of all stakeholders
in the negotiating process, with full disclosure of information to
the public, including the findings of independent impact
assessments.
Such a shift can only come about through a change in political will
and in the power imbalances, both between and within countries,
that currently define trade negotiations.
Developing countries have held out at the WTO for fairer rules. Many
are standing strong against the imposition of new rules through
bilateral and regional agreements. The development of regional blocs
among Southern countries could further serve to offset the political
asymmetry inherent in these trade and investment agreements,
enhancing the bargaining power of developing countries, and may
become a building block of a fairer multilateral system. The South
American bloc MERCOSUR has been able to resist both the EU and
US agendas and WTO-plus rules in the proposed Free Trade Area of
the Americas (FTAA), for example.
The democratisation of trade policy, especially in developing
countries, could transform the negotiating dynamic and the nature of
the rules that result. Despite being utterly excluded from the process,
civil society in many countries has effectively challenged trade and
investment agreements and given voice to the needs of the
disenfranchised.
Trade and investment are essential for development, and the
imbalances that characterise and distort global trade and investment
flows must be addressed as a matter of urgency. Unequal and
exploitative trade and investment agreements, which prohibit the
very policies developing countries need to fight poverty, are no way
to put trade and investment at the service of development, or to build
a safer, fairer world.

Signing Away The Future, Oxfam Briefing Paper, March 2007 38


Notes

1
Speech at Evian Group Plenary discussion, The grave crisis of
globalisation: how can we regenterate the momentum?, Montreux,
Switzerland, 1315 October 2006.
2
Jospeh Stiglitz cited in La Jornada, 19 May 2006,
http://www.jornada.unam.mx/2006/05/19/045n1mun.php, last accessed 3
February 2007.
3
This paper analyses trade and investment agreements negotiated between
developed and (groups of) developing countries. In WTO terminology such
trade agreements are classified as regional trade agreements. They are
also commonly called bilateral agreements. To be compatible with WTO
rules, all regional and bilateral agreements between developed and
developing countries are necessarily free trade agreements as they entail
the liberalisation of substantially all trade between the parties. See GATT
Article XXIV.
4
UNCTAD (2006) World Investment Report 2006. FDI from Developing and
Transition Economies Implications for Development.
5
Ibid.
6
PricewaterhouseCoopers (2006) The World In 2050 how big will the
major emerging market economies get and how can the OECD compete?
7 See the Statement of Robert B. Zoellick, US Trade Representative, before
the Committee on Finance of the US Senate, 5 March 2003; Office of the
United States Trade Representative (2003) Annual Report; and the Trade
Policy Agenda of the President of The United States, Washington DC, 2004.
8
Peter Mandelson, EU Trade Commissioner, Bilateral Agreements In EU
Trade Policy, speech delivered at London School Of Economics, 9 October
2006.
9
Peter Mandelson, EU Trade Commissioner, Address to the European
Socialist Party conference on Economic Partnership Agreements, speech
delivered at European Parliament on 19 October 2006.
10
Figures on Andean countries calculated from CAN statistics, cited in
Oxfam (2006) Song of the Sirens Why the USAndean FTAs undermine
sustainable development and regional integration, and figures on ACP
countries calculated from UN/ITC TradeMap database cited in Oxfam (2006)
Unequal Partners How EU ACP EPAs Could Harm The Development
Prospects Of Many Of The Worlds Poorest Countries.
11
Global Economic Prospects (2005) Trade regionalism and development,
World Bank.
12
P. Sutherland et al. (2004) The future of the WTO, adressing institutional
challenges in the new millenium, report by the consltative board to the
Director General Supachai Panitchpakdi, World Trade Organisation, p 23.

39 Signing Away The Future, Oxfam Briefing Paper, March 2007


13
See Table 1.
14
Letter to Peter Mandelson from Hans Joachim Kiel, Associate Minister for
Commerce, Industry and Labour, Samoa, 21 December 2006.
15
On Colombia, see M. E. Cortes Gamba (2006) Intellectual Property in the
FTA: Impacts on pharmaceutical spending and access to medicines in
Colombia, Mision Salud and Fundacion IFARMA. On Thailand, see A.
Revenga, M. Over, E. Masaki, W. Peerapatanapokin, J. Gold, V.
Tancharoensathien, and S. Thanprasertsuk (2006) The Economics of
Effective AIDS Treatment: Evaluating Policy Options for Thailand, World
Bank. Both cited in Oxfam (2006) Patents versus Patients: Five Years After
The Doha Declaration. On Peru, see Ministerio de Salud del Peru MINSA
(2005) Impacto potencial del TLC en el acceso a medicamentos,.
16
For more information, see G. Downes (2003) Implications of TRIPS For
Food Security In The Majority World, Comhlamh Action Network.
17
On Morocco, see the Industry Functional Advisory Committee (IFAC-3)
report The USMorocco Free Trade Agreement The Intellectual Property
Provisions, 6 April 2004; on the implications, see for example P. Roffe
(2004) Bilateral Agreements and a Trips+ World The ChileUSA FTA,
Quaker International Affairs Programme.
18
Based on data provided in G. Traxler and S. Godoy-Avila (2004)
Transgenic Cotton in Mexico, University of Auburn.
19
R. Macaya (2005) The Economic And Social Consequences Of An
Overprotection Of Intellectual Property Rights In CAFTA, National Chamber
of Generic Products, Costa Rica.
20
See the Final CAFTA-DR Text (Articles 15.9.9 and 15.9.10), which place
limits on what the signatories can require in terms of disclosure. For analysis
of the implications, see GRAIN (2006) FTAs Trading Away Traditional
Knowledge.
21
The requirements of DR-CAFTA will also end the Costa Rican
governments capacity to veto any patent or plant variety that it deems
violates its biodiversity legislation. See GRAIN (2006) FTAs Trading Away
Traditional Knowledge.
22
For more information, see S. Lohr (2002) On intellectual property, U.S.
forgets its own past, International Herald Tribune, 16 October. Also, R.
Kozul-Wright (1995) The myth of Anglo-Saxon capitalism: reconstructing the
history of the American state, in H.-J. Chang and R. Rowthorn (eds.), The
Role of the State in Economic Change, Oxford: Clarendon Press, pp 81
113; H.J. Chang (2002) Kicking Away the Ladder: Development Strategy in
Historical Perspective, London: Anthem.
23
Report of the Commission on Intellectual Property Rights, Integrating
Intellectual Property Rights and Development Policy, London, 2002.
24
On countries that have signed up to the WIPO Copyright Treaty, see
WIPO http://www.wipo.int/treaties/en/, last accessed 3 February 2007. On
DMCA type legislation, see for example Final USSingapore Text (Article
16.4.7) which requires parties to provide adequate legal protection and

Signing Away The Future, Oxfam Briefing Paper, March 2007 40


effective legal remedies against the circumvention of effective technological
measures.
25
On estimated costs to US companies see United States International
Trade Administration website http://www.stopfakes.gov/sf_why.asp, last
accessed 3 February 2007. On money spent by Pharmaceutical Research
and Manufacturers of America on lobbying, see R. Macaya presentation
The Economic and Social Consequences of an Overprotection of
Intellectual Property Rights in CAFTA, National Chamber of Generic
Products, 20 October 2003 to the US House of Representatives.
26
UNCTAD (2004) World Investment Report 2004: The Shift Towards
Services.
27
Peter Mandelson, EU Trade Commissioner, Bilateral Agreements In EU
Trade Policy, speech delivered at London School Of Economics, 9 October
2006.
28
M. Roy, J. Marchetti, and H. Lim (2006) Services Liberalisation in the New
Generation of RTAs How Much Further Than GATS?, WTO.
29
For more details see Roy et al. (2006), ibid.
30
E. Detragiache, T. Tressel, and P. Gupta (2006) Foreign Banks in Poor
Countries: Theory and Evidence, IMF.
31
For more information on the banking sector in Mexico see J.-A. Gonzales-
Anaya (2003) Why Have Banks Stopped Lending in Mexico Since the Peso
Crisis in 1995?, Centre For Research on Economic Development and Policy
Reform, Stanford University; CEPAL (2006) Competencia Bancaria En
Mxico. For figures cited see How NAFTA Failed Mexico, The American
Prospect, 1 July 2003, http://www.prospect.org/print/V14/7/faux-j.html, last
accessed 3 February 2007 and Federal Reserve Bank of Dallas (2002)
Beyond the Border: Financial Globalization Manna or Menace.
32
On the impact of banking reforms on rural poor in Mexico see J. J. Audley,
D. G. Papademetriou, S. Polaski, and S. Vaughan (2004) NAFTA's Promise
And Reality lessons from Mexico for the hemisphere, Carnegie
Foundation.
33
UNCTAD (2005) Report On The Expert Meeting On Distributional
Services.
34
For more information see Roy et al. (2006), op.cit.
35
UNCTAD (2005), op.cit.
36
For more information on the linkages between services liberalisation,
supermarkets, and farmers in developing countries, see Institute for
Agriculture and Trade Policy (2005) The Impact Of GATS On Agriculture,
and T. Reardon et al. (2005) Supermarket expansion in Latin America and
Asia in A. Regmi and M. Gehlhar New Directions In Global Food Markets,
USDA.
37
World Bank (2006) Global Economic Prospects 2006: Economic
Consequences of Remittances and Migration.

41 Signing Away The Future, Oxfam Briefing Paper, March 2007


38
World Bank (2006) At Home & Away: Expanding Job Opportunities for
Pacific Islanders through Labour Mobility, p 69.
39
J. J. Audley, D. G. Papademetriou, S. Polaski and S.Vaughan (2004)
NAFTA's Promise And Reality lessons from Mexico for the hemisphere,
Carnegie Foundation.
40
ICTSD (2006) Japan, Phillipines sign FTA with provisions for labour
movement, in Bridges Weekly New Digest, 20 September.
41
M. Hallward-Driemeier (2003) Do Bilateral Investment TreatiesAttract
FDI? Only A Bit And They Could Bite, World Bank.
42
UNCTAD (2006), op.cit.
43
UNCTAD (2006), op.cit.
44
L. E. Peterson (2004) Bilateral investment treaties and development
policy-making, IISD.
45
This trend started with Article 1106 of the Investment Chapter of NAFTA in
1994, and since then, the vast majority of US and EU investment
agreements have followed suit.
46
E. Braunstein (2006) Foreign Direct Investment, Development And
Gender Equity, UNRISD.
47
L. E. Peterson (2006) South Africas Bilateral Investment Treaties
Implications For Development and Human Rights, Friedrich Ebert Stiftung,
SAIIA and IISD.
48
L. E. Peterson (2004), op.cit.
49
Michael Casey, Azurix Wins $165 Million Vs. Argentina In Latest ICSID
Ruling, 18 July 2006, Dow Jones Newswires.
50
L. E. Peterson (2004), op.cit.
51
ICSID Case No. ARB/01/12. Azurix Corp. v. Argentine Republic, Decision
on Jurisdiction, 8 December 2003.
52
More than 200 cases have now been filed for international investment
arbitration. The majority have been filed at the International Centre for
Settlement of Investment Disputes, hosted by the World Bank and the
United Nations Commission on International Trade Laws Arbitration Rules.
Other disputes were initiated at the Stockholm Chamber of Commerce, the
International Chamber of Commerce, and the Cairo Regional Centre for
International Commercial Arbitration.
53
See for example NAFTAs Powerful Little Secret: Obscure Tribunals
Settle Disputes, But Go Too Far, Critics Say, New York Times, 11 March
2003; CIEL Secretive Bank Tribunal Bans Public and Media Participation in
Bechtel Lawsuit Over Access to Water, 12 February 2003; and Will
UNCITRAL Become Even More Secretive?, Investment Treaty News, 3
September 2006.
54
Interview with Mark Halle, IISD.

Signing Away The Future, Oxfam Briefing Paper, March 2007 42


55
Michael Casey Azurix Wins $165 Million Vs. Argentina In Latest ICSID
Ruling, 18 July 2006, Dow Jones Newswires
56
L. E. Peterson (2003) International Human Rights In Bilateral Investment
Treaties and in Investment Treaty Arbitration.
57
The Economist, A Place For Capital Controls, 31 May 2003; J. Stiglitz
(2002) Gobalization and its Discontents.
58
See for example SingaporeUS FTA Final Text (Article 15.7 and Annex
15A). For opinion see US Reports A Final Deal For Singapore Trade Pact,
New York Times, 17 January 2003.
59
Hearing Before the Committee On Financial Services US House Of
Representatives, 1 April 2003.
60
FAO-ILO-IUF, Agricultural Workers and their Contribution to Sustainable
Agriculture and Rural Development, October 2005.
61
J. J. Audley et al. (2004), op.cit.
62
J. J. Audley et al. (2004), op.cit.
63
J. J. Audley et al. (2004), op.cit.
64
J. J. Audley et al. (2004), op.cit.
65
L. Zarsky and K. Gallagher (2004) Sustainable Industrial Development?
The Performance of Mexicos FDI-led Integration Strategy, Global
Development and Environment Institute, Tufts University.
66 Peru Ministry for Agriculture (1998) Primer Censo Nacional de
Productores y Plantas Procesadoras de Esprragos, Lima, Cited in Oxfam
(2006) Song Of The Sirens Why The USAndean FTAs Undermine
Sustainable Development.
67
ICFTU (2004) Behind The Brand Names Working Conditions And
Labour Rights In EPZs.
68
Dolan, C. S., and K. Sorby (2003) "Gender and Employment in High-Value
Agriculture Industries." Agricultural and Rural Development Working Paper
7. World Bank, Washington, D.C
69
An Ugly Side Of Free Trade: Sweatshops in Jordan, New York Times, 3
May 2006.
70
S. Polaski (2004) Protecting Labour Rights Through Trade Agreements
An Analytical Guide, Carnegie Foundation. For more details on the
Cambodia example see D. Wells (2006) Best Practice in the Regulation of
International Labor Standards: Lessons of the USCambodia Textile
Agreement, McMaster University.
71
World Bank and IFPRI (2005) Agriculture and Achieving the Millennium
Development Goals.
72
For more information see Oxfam (2006) Unequal Partners How EU
ACP EPAs Could Harm The Development Prospects Of Many Of The
Worlds Poorest Countries.
73
Except for Costa Rica, which instead exempted potatoes and onions.

43 Signing Away The Future, Oxfam Briefing Paper, March 2007


74
A. Nadal (2000) The Environmental and Social Impacts Of Economic
Liberalisation Under NAFTA, commissioned by Oxfam GB and WWF
International.
75
PricewaterhouseCoopers (2005) SIA Of The EUACP Partnership
Agreements West Africa Agro Industry.
76
For more information see Oxfam (2005) CAFTA Agriculture Provisions
are Unfair and Threaten the Livelihoods of Central American Farmers.
77
Colombian Ministry of Agriculture and Rural Development, Colombian
Agriculture Before the Free Trade Agreement with the United States, July
2004. Cited in H. Cardenas and K. Vyborny (2005) A contentious US
Andean FTA do it right or not at all, Carnegie Foundation.
78
On Honduras, see Oxfam International (2004), A Raw Deal for Rice under
DR-CAFTA, Oxford. On Ecuador, see Consumers International (2003)
Consumer Charter for Trade, London.
79
On maize prices see F.Harvey Biofuel growth hit by soaring price of grain
New York Times, 22 February 2007. On tortilla prices see Elizabeth Malkin
Thousands in Mexico City protest rising food prices International Herald
Tribune 1 February 2007
80
Oxfam (2004) Euro-Med Seeds Of A Raw Deal?
81
Oxfam (2005) Euro-Med Ensuring A Fair Deal.
82
V. McElhinny (2005) DR-CAFTA Development Impact Assessment.
83
House Committee On Ways and Means Written Statement on Behalf of
Peruvian Asparagus Importers Association, Drexel Hill, Pennsylvania, 12
July 2006.
84
For more information see H.-J. Chang (2002) Kicking Away The Ladder
Development Strategy in Historical Perspective.
85
P. Brenton (2003) Rules Of Origin In FTAs (Trade Note 4), World Bank.
86
E. Miller (2002) The Outlier Sectors Areas of Non-Free Trade In NAFTA,
IADB.
87
For more information see Oxfam New Zealand (2006) Fishing for a
Future: The Advantages and Drawbacks of a Comprehensive Fisheries
Agreement between the Pacific and the European Union.

Signing Away The Future, Oxfam Briefing Paper, March 2007 44


Oxfam International March 2007
This paper was written by Emily Jones. Oxfam acknowledges the assistance of
Amy Barry, Simon Ticehurst, Mark Fried, Marita Hutjes, Duncan Green, Celine
Charvariat, Tasneem Clarke and many other colleagues from Oxfam International
in its production. It is part of a series of papers written to inform public debate on
development and humanitarian policy issues.
The text may be used free of charge for the purposes of advocacy, campaigning,
education, and research, provided that the source is acknowledged in full. The
copyright holder requests that all such use be registered with them for impact
assessment purposes. For copying in any other circumstances, or for re-use in
other publications, or for translation or adaptation, permission must be secured and
a fee may be charged. E-mail publish@oxfam.org.uk.
For further information on the issues raised in this paper please e-mail
advocacy@oxfaminternational.org.

Published by Oxfam International March 2007


Published by Oxfam GB for Oxfam International under ISBN 978-1-84814-606-8

45 Signing Away The Future, Oxfam Briefing Paper, March 2007


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Tel: +44 1865 473727
E-mail: enquiries@oxfam.org.uk
www.oxfam.org.uk
Oxfam International Secretariat: Suite 20, 266 Banbury Road, Oxford, OX2 7DL, UK
Tel: +44 1865 339100. E-mail: information@oxfaminternational.org. Website: www.oxfam.org

Oxfam International advocacy offices: E-mail: advocacy@oxfaminternational.org


Washington: 1112 16th St., NW, Ste. 600, Washington, DC 20036, USA Tel: +1 202 496 1170.
Brussels: 22 rue de Commerce, 1000 Brussels, Belgium Tel: +32 2 502 0391.
Geneva: 15 rue des Savoises, 1205 Geneva, Switzerland Tel: +41 22 321 2371.
New York: 355 Lexington Avenue, 3rd Floor, New York, NY 10017, USA Tel: +1 212 687 2091.

Linked Oxfam organisations: The following organisations are linked to Oxfam International:
Oxfam Japan Maruko bldg. 2F, 1-20-6, Higashi-Ueno, Taito-ku, Tokyo 110-0015, Japan
Tel: + 81 3 3834 1556. E-mail: info@oxfam.jp Website: www.oxfam.jp
Oxfam India B55, First Floor, Shivalik, New Delhi, 1100-17, India
Tel: + 91 11 26693 763. E-mail: info@oxfamint.org.in Website: www.oxfamint.org.in

Oxfam observer member: The following organisation is currently an observer member of Oxfam
International, working towards possible full affiliation:
Fundacin Rostros y Voces (Mxico) Alabama No. 105 (esquina con Missouri), Col. Npoles, C.P.
03810 Mxico, D.F.
Tel/Fax: + 52 55 687 3002. E-mail: communicacion@rostrosyvoces.org
Website: www.rostrosyvoces.org

Signing Away The Future, Oxfam Briefing Paper, March 2007 46